Chapter Four

Business Markets and Business

Buying Behavior

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 Business Markets and
Business Buying Behavior
Topic Outline

• Business Markets
• Business Buyer Behavior
• The Business Buying Process
• E-Procurement: Buying on the Internet
• Institutional and Government Markets

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 Business Markets

Business buyer behavior refers to the buying behavior

of the organizations that buy goods and services for
use in production of other products and services that
are sold, rented, or supplied to others.

Business buying process is the process where

business buyers determine which products and
services are needed to purchase, and then find,
evaluate, and choose among alternative brands

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 Business Markets

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 Business Markets
Market Structure and Demand

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 Business Markets

• More decision participants

• More professional
purchasing effort

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 Business Markets
Types of Decisions and the Decision Process

Supplier development is the

systematic development of
networks of supplier-
partners to ensure an
appropriate and
dependable supply of
products and materials that
they will use in making their
own products or resell
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 Business Buyer Behavior
The Model of Business Buyer Behavior

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 Business Buyer Behavior
Major Types of Buying Situations

Straight rebuy is a routine purchase decision

such as reorder without any modification
Modified rebuy is a purchase decision that
requires some research where the buyer
wants to modify the product specification,
price, terms, or suppliers
New task is a purchase decision that requires
thorough research such as a new product
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 Business Buyer Behavior
Major Types of Buying Situations

• Systems selling involves the purchase of a

packaged solution from a single seller
• Two-step process of selling:
– Interlocking products
– System of production, inventory control,
distribution, and other services to meet the
buyer’s need for a smooth-running operation

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 Business Buyer Behavior
Participants in the Business Buying Process

Buying center is all of the individuals and units

that participate in the business decision-
making process
– Users
– Influencers
– Buyers
– Deciders
– Gatekeepers
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 Business Buyer Behavior
Participants in the Business Buying Process

• Buying center provides

a major challenge
• Who participates in the
process
– Their relative authority
– What evaluation criteria
each participant uses
– Informal participants

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 Business Buyer Behavior
Participants in the Business Buying Process

Users are those that will use the product or service

Influencers help define specifications and provide

information for evaluating alternatives

Buyers have formal authority to select the supplier and

arrange terms of purchase

Deciders have formal or informal power to select and

approve final suppliers

Gatekeepers control the flow of information

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 Business Buyer Behavior
Major Influences on Business Buyers

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 Business Buyer Behavior
Major Influences on Business Buyers
Environmental Factors

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 Business Buyer Behavior
Major Influences on Business Buyers Organizational Factors

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 Business Buyer Behavior
Major Influences on Business Buyers
Interpersonal Factors

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 Business Buyer Behavior
The Buying Process

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 Business Buyer Behavior
The Buying Process

Problem recognition occurs when someone in

the company recognizes a problem or need
• Internal stimuli
– Need for new product or production
equipment
• External stimuli
– Idea from a trade show or advertising

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 Business Buyer Behavior
The Buying Process

General need description describes the

characteristics and quantity of the needed item
Product specification describes the technical
criteria
Value analysis is an approach to cost reduction
where components are studied to determine if
they can be redesigned, standardized, or made
with less costly methods of production

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 Business Buyer Behavior
The Buying Process

Supplier search involves compiling a list of

qualified suppliers

Proposal solicitation is the process of

requesting proposals from qualified suppliers

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 Business Buyer Behavior
The Buying Process

Supplier selection is the process when the

buying center creates a list of desired supplier
attributes and negotiates with preferred
suppliers for favorable terms and conditions

Order-routine specifications is the final order

with the chosen supplier and lists all of the
specifications and terms of the purchase

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 Business Buyer Behavior
The Buying Process

Performance review involves a critique of

supplier performance to the purchase terms

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 Business Buyer Behavior
E-Procurement

• Online purchasing
• Company-buying
sites
• Extranets

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 Business Buyer Behavior
E-Procurement
• Advantages
– Access to new suppliers
– Lowers costs
– Speeds order processing and delivery
– Shares information
– Sales
– Service and support
• Disadvantages
– Can erode relationships as buyers search for new suppliers
– Security

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 Institutional and Government Markets

Institutional markets
consist of hospitals,
nursing homes, and
prisons that provide
goods and services to
people in their care
• Characteristics
– Low budgets
– “Captive” audience

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 Institutional and Government Markets
Government markets tend to favor domestic
suppliers and require suppliers to submit
bids and normally award to the lowest
bidder
• Carefully monitored
• Affected by similar environmental factors
• Good credit
• Non-economic factors
• Minority suppliers
• Depressed suppliers
• Small businesses

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 All rights reserved. No part of this publication may be reproduced, stored in a
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mechanical, photocopying, recording, or otherwise, without the prior written
permission of the publisher. Printed in the United States of America.

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